EU carbon trade volumes rise 2% in 2013

European carbon trading volumes rose 2 percent in 2013, the ninth consecutive year of growing activity in the EU Emissions Trading Scheme.

A record 9.48 billion emissions units changed hands on Europe’s main four carbon exchanges last year, despite tumbling prices for all carbon credits traded in the European market.

Trade in EUAs, the primary currency in the European carbon market, jumped by 23 percent to 8.86 billion units in 2013, the data showed. However, this was offset by a sharp drop in activity in the secondary market for U.N. carbon credits, which has also been beset by a supply surge coupled with a drop in demand. Just 474 million Certified Emissions Reductions (CERs) and 114 million Emissions Reduction Units were transacted last year, figures more than 70 percent below their 2012 highs.

Additional demand for the credits via new markets in other countries has failed to emerge, causing their value to crash by 98 percent in five years to under 40 cents – below the cost of generation.

Emissions options contracts worth a further 502 million units were bought and sold in 2013 – a 40 percent drop on the previous year.

If we speak about the market share, we can say that futures contracts – traditionally the market’s preferred instrument type – made up just over 88 percent of all volumes, the lowest level since 2009.

Spot volumes, on the other hand, jumped more than fivefold to 1.1 billion thanks to the 808 million spot allowances auctioned by EU member states over the past 12 months.

Under EU rules, governments will sell most of the EUAs to be allocated between 2013 and 2020.

German bourse EEX hosted 88 percent of last year’s auction volumes in a bid to attract liquidity but discounting those sales, activity dropped 6 percent year-on-year. Overall, EEX handled 9 percent of all trades in 2013, well below market leader ICE Futures Europe, which controlled 86 percent of the market.

 

 

Global temperatures could rise 4 degrees by 2100

Global average temperatures could rise at least 4 degrees Celsius by 2100 and twice that by 2200 if carbon dioxide emissions are not reduced, according to a new study published in the journal Nature. So, Scientists found global climate is more sensitive to carbon dioxide than most previous estimates.

The research also appears to solve one of the great unknowns of climate sensitivity: the role of cloud formation on global warming. “Our research has shown climate models indicating a low temperature response to a doubling of carbon dioxide from preindustrial times are not reproducing the correct processes that lead to cloud formation,” said lead author from the University of New South Wales’ Center of Excellence for Climate System Science Steven Sherwood.

“When the processes are correct in the climate models the level of climate sensitivity is far higher. Previously, estimates of the sensitivity of global temperature to a doubling of carbon dioxide ranged from 1.5°C to 5°C. This new research takes away the lower end of climate sensitivity estimates, meaning that global average temperatures will increase by 3°C to 5°C with a doubling of carbon dioxide.”

The key to this new estimate is real world observations of water vapor’s role in cloud formation. When water vapor is taken up by the atmosphere via evaporation, updraughts can rise up to 15 km to form clouds that then result in heavy rain, or just a few kilometers before they return to the surface again, never having formed rain clouds. These less ambitious updraughts reduce total cloud cover because they draw more vapor away from the higher-up regions where clouds are formed.

Together, the scientists realized that climate models indicating a limited global temperature response to carbon dioxide fail to include sufficient levels of this lower-level process, instead simulating nearly all updraughts as rising to 15 km where they go on to form clouds. This increase in clouds means an increase reflection of sunlight, causing the climate to become less sensitive to atmospheric carbon dioxide.

So, Sherwood showed his worry. “Rises in global average temperatures of this magnitude will have profound impacts on the world and the economies of many countries if we don’t urgently start to curb our emissions.”

 

2013: great year for California cap and trade program

It was an important year for California’s ambitious efforts to limit greenhouse gases. 2013 marked the first full year of the state’s cap and trade program, the combination of a gradually lowering carbon emissions cap combined with a clean-up-or-pay-up option for the industries affected.

California’s program is the first in the nation.  While the initial auction at the end of 2012 turned in somewhat disappointing results, 2013’s auctions gained a head of steam; to date, more than 324 million carbon allowances have been traded. Each credit is an allowance for one ton of carbon emissions.

But it’s the cash value of those carbon allowances that was watched most closely through 2013 around the state Capitol.  Air Resources Board officials say all told, carbon credits issued and bought in the year were valued at almost $1.1 billion. 

And, because of this trade, there are a lot of cash and there is a great debate about what to do with that money. Bill Magavern, Coalition for Clean Air’s Policy Director, says the list could include everything from weatherization programs to solar panels for low-income housing or even new subsidies for public transit.  He and others argue that all of those efforts would help reduce carbon emissions through energy efficiency or fewer automobiles on the road.

But the Governor Jerry Brown’s own ideas on how to use cap and trade cash are expected to be presented to the Legislature as part of his overall budget plan on Jan. 10.

The Chinese city of Tianjin launched the country’s fifth emissions trading scheme

Tianjin municipality in North China began carbon emissions trading this week, with five deals for about 45,000 tons completed on the first day.

An initial 114 companies from the power, iron and steel, chemical, petrochemical, and oil and gas extraction industries have been included in the quota allocation. All the companies included have emitted more than 20,000 tons of carbon dioxide since 2009. Under the trading program, companies that emit more than their fair share of emissions will be able to buy unused quotas on the market from firms that pollute less.

Companies participating in Tianjin included units of China Huaneng Group Corp., China National Petroleum Corp., Citic Securities Co. and Hanergy Holding Group Ltd.

Tianjin is the fifth trading market started this year, following Beijing, Shanghai, Shenzhen and Guangdong.

The pilot schemes were a landmark for a China intent on building a nationwide carbon trading market. The country has pledged to reduce carbon dioxide emissions by 40 to 45 percent per unit of GDP by 2020, compared with 2005.

China takes the right steps by setting a cap on emissions and a price on carbon. Last week Guangdong, a province of more than 100 million people, and the largest of seven carbon markets planned in China, is the first region to use auctions to allocate a portion of its emission permits instead of giving all of them away for free.

The Chinese capacity to implement is well known and two more pilot trading systems are planned next year. It is too early to understand if the pilots will be effective enough to give significant reductions. But the new pilot schemes in China represent a great step forward for China and for the world’s pathway to low carbon growth.

Seed diversity is needed to the adaption of food systems to climate change

Global food systems will struggle to adapt to climate change unless urgent action is taken to increase seed diversity.

In a recent report, the Ecumenical Advocacy Alliance (EAA), Gaia Foundation and African Biodiversity Network (ABN) highlight that the loss of 75% of the world’s agricultural diversity in recent decades means that crop varieties that could help farmers to adapt to new climate conditions may not be available when needed.

In ‘Seeds for Life: Scaling Up Agrobiodiversity’, the authors give a stark warning that without access to a wide gene pool of crops, farmers will be unable to spread their risk, or breed new varieties to adapt to changing weather patterns. The report emphasizes that urgent action must be taken to support farmers to revive their seed saving practices and knowledge, and to keep this diversity alive and accessible in fields today and for the future.

For thousands of years of agriculture, farmers have increased seed diversity and deepened their complex knowledge, to give them to tools to deal with the multiple challenges of farming. But the industrialization of farming in recent decades has meant that this seed and knowledge is rapidly disappearing. The resulting loss of germ plasm from which to breed and adapt new crops means that farmers and food systems are increasingly vulnerable in the face of climate change.

 “Seeds for Life” warns of the dangers of leaving a reduced agricultural gene pool for future generations – but it also shares inspiring stories of farmers around the world who are working to revive seed diversity. The report gives key recommendations for policy and practice to revive resilient food systems, so that future generations may also be able to farm and eat.

The report can be downloaded here: http://www.gaiafoundation.org/seeds-for-life-scaling-up-agrobiodiversity-new-report

 

51% of the companies are emitting unsustainable levels of CO2, according to a Climant Counts carbon report

51% of the companies are emitting unsustainable levels of CO2, according to a Climant Counts carbon report, an organization that measures the role corporations play on climate.

The purpose of this study was to analyze the greenhouse gas emissions of 100 global corporations from different sectors between 2005 and 2012 to determine their performance against science-based goals that seek to limit climate change to 2° Celsius (3.6° Fahrenheit).

Another interesting data point of this study is that 25 of the 49 companies that scored sustainably decreased their emissions even as their revenues grew. “It is a proof that decoupling of growth and emissions is possible, at least in the short term,” said Climate Counts in a statement.

The best-placed in the ranking were software company Autodesk, consumer products giant Unilever and pharmaceutical Eli Lilly.

The main criteria to include corporations to the study were the regularity with which they have reported their greenhouse gas emissions over the last years. Many companies, particularly in less developed countries, do not report their carbon footprint.

Also, the report said that “One of the premises of this report is that while sovereign nations must come to an agreement on how to reduce global CO2 emissions, there is an increasing role to be played by the business community”.

Countries that are parties to the U.N. Framework Convention on Climate Change (UNFCCC) are currently negotiating a new global agreement to tackle rising CO2 emissions.

The new agreement would include emerging economies, which didn’t have any targets under the current deal (the Kyoto Protocol).

Guangdong carbon market in China begins working

China began trading in Guangdong’s carbon permit market, which is expected to be the world’s second-largest market after the European Union in terms of carbon dioxide emissions covered. It is far larger than either the Australian or Californian emissions trading schemes.

The Chinese government has approved seven pilot carbon trading exchanges in total, with Shenzhen being the first to launch in June followed by Beijing and Shanghai. However, Guangdong, which is home to over 100 million people and has an economy larger than Indonesia, far outweighs the other pilot projects launched to date.

Aside from being the largest carbon market to operate in China yet, Guangdong is also the first to use auctions to distribute emissions permits, rather than offering them all initially for free.

The debut trade on the China Emissions Exchange in Guangzhou went through in line with market expectations at 61 yuan ($10.04), with cement firm Hailuo buying 20,000 carbon permits from the new energy arm of state-owned power producer Huadian Energy Co Ltd.

Xie Zhenhua, vice director of the National Development and Reform Commission, China’s economic planning agency, said the carbon markets will “play a very significant role” in China’s efforts to reduce its carbon emissions. China has vowed to reduce its carbon emissions per capita of GDP, known as emissions intensity, by 40–45 percent by 2020 compared with 2005 levels.

Guangdong’s carbon scheme caps CO2 emissions from 242 of the province’s major power generators and cement, iron and steel producers at 350 million tons per year, with a further 38 million tons set aside in reserves for new entrants and potential adjustments.

Companies are forced to pay for 3 percent of their expected emissions in the first year of the scheme, with that share gradually rising in the future.

Also, the Guangdong government said that it would expand the market to cover five new sectors, including textiles, paper production and metals, although it gave no timeline.

China is the world’s biggest emitter of greenhouse gases. But China is also a world leader in renewable energy, including wind and solar power. China is working hard to increase hydropower and nuclear power capabilities as well in an effort to reduce reliance on coal, and is making major economic reforms that will open energy markets to natural gas development and imports that have been priced out due to coal-power subsidies.

 

Six nations make progress to handing out free carbon permits

Six EU member states moved closer in the past week towards handing to industry this year’s quota of free carbon permits.

The Czech Republic, Denmark and Hungary have updated and resubmitted allocation plans to reflect global cuts to the amount of permits they originally requested for 2013, a measure the Commission said is required to keep the bloc’s total emissions under legal limits for the 2013-2020 period.

Spain, Bulgaria and France have also completed the first stage. However, 11 nations, including Germany, Poland and Italy, still have made no progress in the process. And, precisely, these nations are the major emitters and they represent 49 percent of the allowances to be handed out. Another interesting data is that thirteen countries, accounting for 32 percent of the total number of permits to be distributed to industry, have reached the second step in the four-step process. And none has progressed further.

The lengthy and bureaucratic process coupled with the nearing holiday season makes it doubtful that most companies will receive their permit quotas this year.

Industrial manufacturers regulated by the EU’s Emissions Trading Scheme (ETS), such as steel and cement producers, get free carbon allowances to help them compete with rivals in other countries that have looser environmental regulations.

But this year’s EU-wide allocation of free permits, which was scheduled to occur in February, has been delayed largely due to late submissions by governments. That has prevented companies from being able to estimate the cost of complying with the ETS, to sell surplus permits to raise cash or to use them as collateral for finance.

 

U.S. Energy Deparment opens $8 billion loan guarantee for innovative energy projects

The U.S. Department of Energy opened an $8 billion loan guarantee program in order to support innovative advanced fossil energy projects that avoid or reduce greenhouse gases, such as advanced resource development, carbon capture, low-carbon power systems, and efficiency improvements.

The loan guarantee is a part of President Barack Obama’s Climate Action Plan. “Under the Obama Administration, the Energy Department is taking an all-of-the-above approach to American energy to ensure we develop all our abundant energy resources responsibly and sustainably,” said Energy Secretary Ernest Moniz.

“Currently providing 80 percent of our energy, coal and other fossil fuels will continue to be a critical part of our energy portfolio as we move toward a low-carbon future. By helping to accelerate the introduction of innovative, clean fossil energy technologies ready for deployment at commercial-scale today, investments under this solicitation will help ensure we continue to have access to affordable, clean energy from all our domestic energy resources tomorrow”, he explained.

Currently, the Department of Energy’s Loan Programs Office (LPO) supports a large, diverse portfolio of more than $30 billion supporting more than 30 closed and committed projects, which range from thermal energy to electric vehicles.

European Parliament votes to remove surplus permits from the carbon market

The European Parliament has voted finally to remove surplus permits from the carbon market from next year to prop up allowance prices on the EU Emissions Trading Scheme (ETS), ending months of argument over the plan.

The full assembly voted in Strasbourg to approve the backloading proposal, which will allow regulators to make a one-off delay to scheduled sales of 900 million carbon permits.

The European Commission wanted to intervene in the market to lift carbon prices to a level that prompts companies to cut their greenhouse gas emissions, for example by investing in energy efficiency or switching to renewable energy sources. If the carbon prices are low, it is more difficult that companies invest in that.

Analysts predict prices could at least double due to backloading, but expect it will be years before they rise above the 20-euro level needed to prompt industry and utilities to invest in greener energy.

Despite this initiative, some lawmakers believe the bloc’s carbon market will be irrelevant without further reform. “It’s clear that backloading is not enough. The market is still oversupplied by 2 billion permits, but this buys us time to have a discussion on how to reform it,” said Matthias Groote, the German Socialist lawmaker.

The European Commission proposed backloading as a limited first step to rescue the ETS, its flagship tool to curb emissions of heat-trapping gases blamed for climate change.

In January, it is expected that the Commission will publish a legislative proposal on deeper ETS reforms.